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UK interest rates held at 0.5% | UK interest rates held at 0.5% |
(40 minutes later) | |
The Bank of England has continued to hold UK interest rates at 0.5% and announced no change to its quantitative easing (QE) programme. | The Bank of England has continued to hold UK interest rates at 0.5% and announced no change to its quantitative easing (QE) programme. |
QE is the Bank's scheme to boost the economy by buying bonds. In February, the Bank's monetary policy committee (MPC) boosted the stimulus to £325bn. | QE is the Bank's scheme to boost the economy by buying bonds. In February, the Bank's monetary policy committee (MPC) boosted the stimulus to £325bn. |
Rates have been at 0.5% since March 2009. | Rates have been at 0.5% since March 2009. |
Earlier, data showed a shock 1% fall in manufacturing in February, suggesting the economic recovery may not be easy. | Earlier, data showed a shock 1% fall in manufacturing in February, suggesting the economic recovery may not be easy. |
The central bank has said that the UK is unlikely to enter recession this year, forecasting growth of about 1% in 2012. | The central bank has said that the UK is unlikely to enter recession this year, forecasting growth of about 1% in 2012. |
But the Bank's governor, Sir Mervyn King, has warned that the economy will "zig zag" between growth and contraction throughout the year. | But the Bank's governor, Sir Mervyn King, has warned that the economy will "zig zag" between growth and contraction throughout the year. |
'Difficult call' | 'Difficult call' |
The decision to leave the size of the asset purchase programme unchanged was widely expected, given that the latest extension of QE runs until May. | The decision to leave the size of the asset purchase programme unchanged was widely expected, given that the latest extension of QE runs until May. |
"The focus therefore remains on whether further asset purchases will be announced next month," said Ian McCafferty, chief economic adviser to the CBI business group. | "The focus therefore remains on whether further asset purchases will be announced next month," said Ian McCafferty, chief economic adviser to the CBI business group. |
>Shock fall in UK factory output | |
"It's a difficult judgement call, but on balance we're not expecting a further extension next month. Recent economic data has been more encouraging, and with oil prices high, there's now less certainty around how far and how fast inflation will fall." | "It's a difficult judgement call, but on balance we're not expecting a further extension next month. Recent economic data has been more encouraging, and with oil prices high, there's now less certainty around how far and how fast inflation will fall." |
The research consultancy, Capital Economics, said that while it did not expect an extension to QE next month , it still thought the MPC would undertake more purchases in time. | The research consultancy, Capital Economics, said that while it did not expect an extension to QE next month , it still thought the MPC would undertake more purchases in time. |
Despite Thursday's disappointing manufacturing data from the Office for National Statistics, other recent surveys have painted a more encouraging picture of the economic recovery. | Despite Thursday's disappointing manufacturing data from the Office for National Statistics, other recent surveys have painted a more encouraging picture of the economic recovery. |
The Purchasing Managers' Index (PMI) suggested that both the manufacturing and service sectors picked up in March. | The Purchasing Managers' Index (PMI) suggested that both the manufacturing and service sectors picked up in March. |
The BBC's economics editor, Stephanie Flanders, describes the data as being "all over the place lately". | |
"But the underlying message has not changed: the recovery is still fragile, and so is the optimistic mood we have seen in global financial markets since the start of 2012," she says. | |
In addition, the Bank of England may have to contend with high levels of inflation in the coming months. | |
Inflation measured by the Consumer Prices Index (CPI) eased to 3.4% in February from its peak of 5.2% in September. | Inflation measured by the Consumer Prices Index (CPI) eased to 3.4% in February from its peak of 5.2% in September. |
The Bank has forecast that it will be back to its target 2% by the end of the year. But at its last meeting in March, it warned that high oil prices could slow the global and UK recovery and drive up inflation. | The Bank has forecast that it will be back to its target 2% by the end of the year. But at its last meeting in March, it warned that high oil prices could slow the global and UK recovery and drive up inflation. |
Lowering inflation is seen as key to the recovery as it will help alleviate the squeeze on consumers and lead to a rise in spending. | Lowering inflation is seen as key to the recovery as it will help alleviate the squeeze on consumers and lead to a rise in spending. |